SIEBERT FINANCIAL CORP — Interim / Quarterly Report 2012

May 15, 2012

10-Q 1 n12468_10-q.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q

(Mark One)
x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
	For the
quarterly period ended March 31, 2012
	OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
	For the
transition period from _____ to _______
	Commission
file number 0-5703

Siebert Financial Corp.
(Exact Name of Registrant as Specified in its Charter)

New York
(State or
Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

885 Third Avenue, New York, NY 10022
(Address of Principal Executive Offices) (Zip Code)
(212) 644-2400
(Registrant’s Telephone Number, Including Area Code)
(Former Name, Former Address and Former Fiscal Year, if Changed Since
Last Report)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one)

| Large
Accelerated Filer o | Accelerated
Filer o |
| --- | --- |
| Non-Accelerated
Filer o | Smaller
Reporting Company x |

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No x

Indicate the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: As of April 20, 2012, there were 22,101,535 shares of Common Stock, par value $.01 per share outstanding.

Unless the context otherwise requires, the “Company” shall mean Siebert Financial Corp. and its wholly owned subsidiaries and “Siebert” shall mean Muriel Siebert & Co., Inc., a wholly owned subsidiary of the Company.

Certain statements contained in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” below and elsewhere in this report, as well as oral statements that may be made by us or by our officers, directors or employees acting on our behalf, that are not statements of historical or current fact constitute “forward looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward looking statements involve risks and uncertainties and known and unknown factors that could cause our actual results to be materially different from our historical results or from any future results expressed or implied by such forward looking statements, including, without limitation: changes in general economic and market conditions; changes and prospects for changes in interest rates; fluctuations in volume and prices of securities; demand for brokerage and investment banking services; competition within and without the discount brokerage business, including the offer of broader services; competition from electronic discount brokerage firms offering greater discounts on commissions than we do; the prevalence of a flat fee environment; decline in participation in corporate or municipal finance underwritings; limited trading opportunities; the method of placing trades by our customers; computer and telephone system failures; our level of spending on advertising and promotion; trading errors and the possibility of losses from customer non-payment of amounts due; other increases in expenses and changes in net capital or other regulatory requirements. We undertake no obligation to publicly release the results of any revisions to these forward-looking statements which may be made to reflect events or circumstances after the date when such statements were made or to reflect the occurrence of unanticipated events. An investment in us involves various risks, including those mentioned above and those which are detailed from time to time in our Securities and Exchange Commission filings.

1

Part I - FINANCIAL INFORMATION

Item 1. Financial Statements.

Siebert Financial Corp. & Subsidiaries Consolidated Statements of Financial Condition

	March 31, 2012 (unaudited)
ASSETS
Cash and cash equivalents	$ 20,545,000	$	21,167,000
Cash equivalents – restricted	1,532,000		1,532,000
Receivable from brokers	1,619,000		1,033,000
Securities owned, at fair value	264,000		250,000
Furniture, equipment and leasehold
improvements, net	805,000		757,000
Investment in and advances to affiliates	8,509,000		8,619,000
Prepaid expenses and other assets	930,000		827,000
Intangibles, net	635,000		638,000
	$ 34,839,000	$	34,823,000
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Accounts payable and accrued liabilities	2,996,000		3,599,000
Contingencies
Stockholders’ equity:
Common stock, $.01 par value; 49,000,000
shares authorized, 23,211,846 shares issued, and 22,101,649 and 22,105,499
shares outstanding at March 31, 2012 and December 31, 2011, respectively	232,000		232,000
Additional paid-in capital	19,490,000		19,490,000
Retained earnings	16,855,000		16,230,000
Less: 1,110,197 and 1,106,347 shares of
treasury stock, at cost at March 31, 2012 and December 31, 2011, respectively	(4,734,000	)	(4,728,000	)
	31,843,000		31,224,000
	$ 34,839,000	$	34,823,000

See notes to condensed consolidated financial statements.

2

Siebert Financial Corp. & Subsidiaries
Consolidated Statements of Operations
(unaudited)

	Three Months Ended March 31, — 2012	2011
Revenues:
Commissions and fees	$ 5,158,000	$	3,945,000
Investment banking	509,000		1,172,000
Trading profits	863,000		377,000
Interest and dividends	23,000		9,000
	6,553,000		5,503,000
Expenses:
Employee compensation and benefits	2,489,000		2,462,000
Clearing fees, including floor brokerage	967,000		924,000
Professional fees	790,000		1,413,000
Advertising and promotion	138,000		100,000
Communications	488,000		557,000
Occupancy	251,000		271,000
Other general and administrative	639,000		685,000
	5,762,000		6,412,000
Loss from equity investees	(154,000	)	(1,084,000	)
Income (loss) before income taxes	637,000		(1,993,000	)
Income tax provision	12,000		11,000
Net income (loss)	$ 625,000	$	(2,004,000	)
Net income (loss) per share of common stock
- Basic and Diluted	$ .03	$	(.09	)
Weighted average shares outstanding - Basic
and Diluted	22,103,495		22,121,188

See notes to condensed consolidated financial statements.

3

Siebert Financial Corp. & Subsidiaries
Consolidated Statements of Cash Flows
(unaudited)

	Three Months Ended March 31, — 2012	2011
Cash flows from operating activities:
Net income (loss)	$ 625,000	$	(2,004,000	)
Adjustments to reconcile net income (loss) to net
cash (used in) provided by operating activities:
Depreciation and amortization	109,000		132,000
Loss from equity investees	154,000		1,084,000
Distribution from equity investees	2,000		479,000
Stock based compensation	—		2,000
Changes in:
Securities owned, at fair value	(14,000	)	(15,000	)
Receivable from brokers	(586,000	)	(273,000	)
Income tax refund receivable	—		358,000
Prepaid expenses and other assets	(103,000	)	(214,000	)
Accounts payable and accrued liabilities	(603,000	)	820,000
Net cash (used in) provided by operating
activities	(416,000	)	369,000
Cash flows from investing activities:
Purchase of furniture, equipment and
leasehold improvements	(154,000	)	(3,000	)
(Payment) collection of advances made to
equity investees	(46,000	)	47,000
Net cash (used in) provided by investing
activities	(200,000	)	44,000
Cash flows from financing activities:
Purchase of treasury shares	(6,000	)	(7,000	)
Net cash used in financing activities	(6,000	)	(7,000	)
Net (decrease) increase in cash and cash
equivalents	(622,000	)	406,000
Cash and cash equivalents - beginning of
period	21,167,000		22,646,000
Cash and cash equivalents - end of period	$ 20,545,000	$	23,052,000
Supplemental cash flow disclosures:
Cash paid for:
Income taxes	$ 12,000	$	11,000

See notes to condensed consolidated financial statements

4

Siebert Financial Corp. & Subsidiaries Notes to Condensed Consolidated Financial Statements Three Months Ended March 31, 2012 and 2011 (Unaudited)

1.	Organization and Basis of Presentation:
	The
consolidated financial statements include the accounts of Siebert Financial
Corp. (the “Company”) and its wholly owned subsidiaries Muriel Siebert &
Co., Inc. (“Siebert”) and Siebert Women’s Financial Network, Inc. (“WFN”).
All material intercompany balances and transactions have been eliminated.
Investment in two entities in which the Company has ownership interests of
49% and 33.33%, respectively, are accounted for by the equity method and
included in investment in and advances to affiliates in the consolidated
statements of financial condition.
	The
condensed consolidated interim financial statements presented herein are
unaudited and include all adjustments (consisting of normal recurring
adjustments) which are, in the opinion of management, necessary for a fair
presentation of the financial position and results of operations of the
interim periods pursuant to the rules and regulations of the Securities and
Exchange Commission (the “SEC”). Certain information and footnote disclosures
normally included in annual financial statements prepared in accordance with
generally accepted accounting principles (“GAAP”) in the United States of
America (“U.S.”) have been condensed or omitted pursuant to SEC rules and
regulations, although the Company believes that the disclosures made are
adequate to make the information not misleading. The balance sheet at
December 31, 2011 has been derived from the audited consolidated statement of
financial condition at that date, but does not include all information and
footnotes required by U.S. GAAP for complete financial statements. These
condensed consolidated financial statements should be read in conjunction
with the consolidated financial statements included in the Company’s Annual
Report on Form 10-K for the year ended December 31, 2011. Because of the
nature of the Company’s business, the results of operations for the three
months ended March 31, 2012 are not necessarily indicative of operating
results for the full year.
2.	Securities:
	Securities
owned are carried at fair value with realized and unrealized gains and losses
reflected in trading profits. Siebert clears all its security transactions
through unaffiliated clearing firms on a fully disclosed basis. Accordingly,
Siebert does not hold funds or securities for, or owe funds or securities to,
its customers. Those functions are performed by the clearing firms.
3.	Fair Value of Financial Instruments:
	Authoritative
accounting guidance defines fair value, establishes a framework for measuring
fair value and establishes a fair value hierarchy. Fair value is the price
that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between participants at the measurement date. Fair value
measurements are not adjusted for transaction costs. The fair value hierarchy
prioritizes inputs to valuation techniques used to measure fair value into
three levels:

5

| Level 1 – Unadjusted quoted prices in active markets for identical assets or
liabilities. |
| --- |
| Level 2 – Inputs other than quoted prices that are observable, either directly or
indirectly, and reasonably available. |
| Level 3 – Unobservable inputs which reflect the assumptions that management
develops based on available information about the assumptions market
participants would use in valuing the asset or liability. |
| The
classification of financial instruments valued at fair value at March 31,
2012 is as follows: |

| Financial
Instruments | Level
1 | Total |
| --- | --- | --- |
| Cash equivalents | $ 19,831,000 | $ 19,831,000 |
| Securities | 264,000 | 264,000 |
| | $ 20,095,000 | $ 20,095,000 |

| | Securities
include common stock of $264,000 at March 31, 2012, valued on the last
business day of the period at the last available reported sales price on the
primary securities exchange (Level 1). |
| --- | --- |
| | In
May 2011, the Financial Accounting Standards Board issued guidance to expand
disclosures for Level 3 measurements based on unobservable inputs. The
Company adopted this standard in January 2012. The adoption of this standard
did not have a material impact on the Company’s disclosures. |
| 4. | Per Share Data: |
| | Basic
earnings (loss) per share is calculated by dividing net income (loss) by the
weighted average outstanding common shares during the period. Diluted
earnings per share is calculated by dividing net income by the number of
shares outstanding under the basic calculation and adding all dilutive
securities, which consist of options. There were no dilutive options for the
three months ended March 31, 2012. Accordingly, basic and diluted income per
share are the same for the period. The Company incurred a net loss for the
three months ended March 31, 2011. Accordingly, basic and diluted net loss
per common share are the same for such period as the effect of stock options
is anti-dilutive. Shares underlying stock options not included in the
diluted computation amounted to 1,228,200 in 2012 and 2011. |
| 5. | Net Capital: |
| | Siebert
is subject to the SEC’s Uniform Net Capital Rule (Rule 15c3-1), which
requires the maintenance of minimum net capital. Siebert has elected to use
the alternative method, permitted by the Rule, which requires that Siebert
maintain minimum net capital, as defined, equal to the greater of $250,000 or
two percent of aggregate debit balances arising from customer transactions,
pursuant to the Rule. As of March 31, 2012, Siebert had net capital of
approximately $18,477,000 as compared with net capital requirements of
$250,000. |

6

6.	Revenue:
	Commissions and fees earned on customer trades together with related
clearing expenses are recorded on a trade-date basis. Fees, consisting
principally of revenue participation with the Company’s clearing broker in
distribution fees, and interest are recorded as earned.
	Trading profits are also recorded on a trade-date basis.
	Investment banking revenue includes gains and fees, net of syndicate
expenses, arising from underwriting syndicates in which the Company
participates. Investment banking management fees are recorded on the offering
date, sales concessions on the settlement date and underwriting fees at the
time the underwriting is completed and the income is reasonably determinable.
	Interest is recorded on an accrual basis and dividends are recorded
on the ex-dividend date.
7.	Capital Transactions:
	On January 22, 2008, the Board of Directors of the Company authorized
a buy back of up to 300,000 shares of common stock. Shares will be purchased
from time to time, at management’s discretion, in the open market and in
private transactions. The Company purchased 3,850 shares at an average price
of $1.65 in the first quarter of 2012.
8.	Investment in and advances to affiliates:
	Siebert, Brandford, Shank & Co., L.L.C. (“SBS”)
	Siebert holds a 49% ownership interest in SBS which is engaged in
municipal bond underwritings. Income or loss from SBS is considered to be
integral to Siebert’s operations and material to the results of operations.
	Summarized
financial data of SBS is set forth below.

	March 31, — 2012	2011
Total
assets, including secured demand note of $1,200,000 due from Siebert	$ 32,782,000
Total
liabilities, including subordinated liabilities of
$1,200,000 due to Siebert	16,269,000
Total
members’ capital	16,512,000
Regulatory
minimum net capital requirement	257,000
Total
revenues	5,626,000	$	3,945,000
Net loss	(299,000	)	(2,170,000	)

| Siebert charged SBS $19,000 for each of the three months ended March
31, 2012 and 2011, for general and administrative services, which Siebert
believes approximates the cost of furnishing such services. |
| --- |
| Siebert’s share of net loss for the three months ended March 31, 2012
and 2011, amounted to $146,000 and $1.1 million, respectively. |

7

| Siebert received no distributions from SBS during the three months
ended March 31, 2012, and Siebert’s share of undistributed earnings from SBS
amounted to $7.7 million at March 31, 2012. Such amount may not be
immediately available for distribution to Siebert for various reasons
including the amount of SBS’s available cash, the provisions of the agreement
between Siebert and the principals and SBS’s continued compliance with its
regulatory net capital requirements. |
| --- |
| SBS Financial Products Company, LLC
(“SBSFPC”) |
| The Company has a 33.33% ownership interest in, and the two
individual principals of SBS have an aggregate 66.66% ownership interest in,
SBSFPC which engages in derivatives transactions related to the municipal
underwriting business. Income and loss from SBSFPC is considered to be integral
to the Company’s operations and material to the results of operations. |
| Summarized
financial data of SBSFPC is set forth below. |

Total assets	March 31, 2012 — $ 224,573,000
Total
liabilities	223,630,000
Total
members’ capital	943,000
Total
revenues	21,000	$	(12,000	)*
Net loss	(25,000	)	(63,000	)

| | *Negative balance was attributable to unrealized loss on derivative
contracts. |
| --- | --- |
| | The Company’s share of net loss for the three months ended March 31,
2012 and 2011 amounted to $8,000 and $21,000, respectively. |
| | At March 31, 2012, the Company had received cumulative distributions of $86,000 in excess of
cumulative earnings from SBSFPC. The Company received a distribution from
SBSFPC of $2,000 during the three months ended March 31, 2012. |
| 9. | Contingent Liabilities: |
| | Retail customer transactions are cleared through clearing brokers on
a fully disclosed basis. If customers do not fulfill their contractual
obligations, the clearing broker may charge Siebert for any loss incurred in
connection with the purchase or sale of securities at prevailing market
prices to satisfy the customer obligations. Siebert regularly monitors the
activity in its customer accounts for compliance with its margin
requirements. Siebert is exposed to the risk of loss on unsettled customer
transactions if customers are unable to fulfill their contractual
obligations. There were no material losses for unsettled customer
transactions for the three months ended March 31, 2012 and 2011. |
| | In a prior year, Siebert had been named as one of the defendants in a
class action pending in the United States District Court, Southern District
of New York. Among other claims, the third amended complaint in the action
asserted on behalf of a class of purchases in a public offering of
$1,500,000,000, 6.75% Subordinated Notes due 2017 (the “Notes”), issued by
Lehman Brothers Holdings, Inc., (“LBHI”) and certain smaller issuances of
other securities that Siebert and other underwriters of the Notes violated
Section 11 of the Securities Act of 1933, and other applicable law in that relevant
offering materials were false and misleading. Siebert had purchased $15
million of the Notes and $462,953 of other securities as an underwriter in
the offerings. Siebert and other underwriters moved to dismiss the third
amended complaint on various grounds. The Court granted in part and denied in
part the motion by and order dated July 27, 2011. On November 3, 2011,
Siebert and the plaintiffs class agreed to resolve all claims against Siebert
in consideration of a $1 million payment by Siebert. The settlement is
subject to court approval. The hearing to approve the settlement is scheduled
to be heard on June 21, 2012. As of December 31, 2011, |

8

| | the Company had accrued a $1 million provision for loss to reflect
the settlement which it paid during the first quarter
of 2012 into an escrow account. As certain defendants did not agree to a settlement, additional
liability to the Company is possible. At present, the Company is uncertain as
to the potential liability, if any, in connection with the non-settling
defendants. |
| --- | --- |
| | Siebert is party to certain claims, suits and complaints arising in
the ordinary course of business including actions related to various offering
of notes by LBHI. In the opinion of management all such claims, suits and
complaints are without merit, or involve amounts which would not have a
significant effect on the financial position or results of operations of the
Company. |
| 10. | Income taxes: |
| | There is no provision for other income taxes for the three months ended
March 31, 2012, because the Company utilized its net operating carry forward
for which no benefit was previously recognized. Due to cumulative losses
incurred by the Company and its subsidiaries during the prior three years,
the Company has concluded that it is not more likely than not that it will
realize its net deferred tax asset and, accordingly, has recorded a valuation
allowance to fully offset its net deferred tax asset at March 31, 2012, which
amounted to $3,997,000. |

9

| Item 2. Management’s Discussion and
Analysis of Financial Condition and Results of Operations |
| --- |
| This discussion should be read in conjunction with our audited
consolidated financial statements as of and for the year ended December 31,
2011, and our unaudited consolidated financial statements and the notes
thereto contained elsewhere in this Quarterly Report. |
| Business Environment |
| Our working capital is invested primarily in money market funds, so
that liquidity has not been materially affected. The crisis did have the
effect of reducing participation in the securities market by our retail and
institutional customers, which had an adverse effect on our revenues.
However the market has improved in the first quarter of 2012 and consequently
so have our revenues. Our affiliate, Siebert, Brandford, Shank & Co.,
L.L.C. had a loss for the current period of approximately $299,000. This
resulted in a loss to the Company of $146,000 for the current three month
period. Our expenses include the costs of an arbitration proceeding commenced
by a former employee following the termination of his employment, which
remains unresolved. The Company believes that the action is without merit,
but the costs of defense, which are included as professional expenses, have
adversely affected the Company’s results of operations and may continue to
affect the results of operations until the action is completed. Competition
in the brokerage industry remains intense. |
| The following table sets forth certain metrics as of March 31, 2012
and 2011 and for the three months ended March 31, 2012 and 2011,
respectively, which we use in evaluating our business. |

Retail Customer Activity:	For the Three Months ended March 31, — 2012	2011
Total retail
trades:	103,123	114,029
Average
commission per retail trade:	$ 31.75	$ 21.72

| Retail
customer balances: | As of March 31, — 2012 | 2011 |
| --- | --- | --- |
| Retail
customer net worth (in billions): | $ 6.8 | $ 7.0 |
| Retail
customer money market fund value (in billions): | $ 1.0 | $ 1.0 |
| Retail
customer margin debit balances (in millions): | $ 237.0 | $ 237.6 |
| Retail customer
accounts with positions: | 44,003 | 48,639 |

Description:
•	Total retail trades represent retail trades that generate
commissions.
•	Average commission per retail trade represents the average commission
generated for all types of retail customer trades.
•	Retail customer net worth represents the total value of securities
and cash in the retail customer accounts before deducting margin debits.
•	Retail customer money market fund value represents all retail
customers accounts invested in money market funds.
•	Retail customer margin debit balances represent credit extended to
our customers to finance their purchases against current positions.
•	Retail customer accounts with positions represent retail customers
with cash and/or securities in their accounts.
Like
other securities firms, we are directly affected by general economic and
market conditions including fluctuations in volume and prices of securities,
changes and prospects for changes in interest rates and demand for brokerage
and investment banking services, all of which can affect our relative
profitability. In periods of reduced financial market activity, profitability
is likely to be adversely affected because certain expenses remain relatively
fixed, including salaries and related costs, portions of communications costs
and occupancy expenses. Accordingly, earnings or loss for any period should
not be considered representative of any other period.
Recent Developments
On
January 22, 2008, our Board of Directors authorized a buy back of up to
300,000 shares of common stock. Shares will be purchased from time to time,
in our discretion, in the open market and in private transactions. The
Company purchased 3,850 shares at an average price of $1.65 in the first
quarter of 2012.

10

| Critical Accounting Policies |
| --- |
| We
generally follow accounting policies standard in the brokerage industry and
believe that our policies appropriately reflect our financial position and
results of operations. Our management makes significant estimates that affect
the reported amounts of assets, liabilities, revenues and expenses and the
related disclosure of contingent assets and liabilities included in the
financial statements. The estimates relate primarily to revenue and expense
items in the normal course of business as to which we receive no
confirmations, invoices, or other documentation at the time the books are
closed for a period. We use our best judgment, based on our knowledge of
these revenue transactions and expenses incurred, to estimate the amounts of
such revenue and expense. We are not aware of any material differences
between the estimates used in closing our books for the last five years and
the actual amounts of revenue and expenses incurred when we subsequently
receive the actual confirmations, invoices or other documentation. Estimates
are also used in determining the useful lives of intangible assets, and the
fair market value of intangible assets. Our management believes that its
estimates are reasonable. |
| Results of Operations |
| We had
net income of $625,000 and a net loss of $2.0 million for the three months
ended March 31, 2012 and 2011, respectively. |
| Total
revenues for the three months ended March 31, 2012 were $6.6 million, an
increase of $1.1 million or 19.1% from the same period in 2011. |
| Commission
and fee income for the three months ended March 31, 2012 was $5.2 million, an
increase of $1.2 million or 30.8% from the same period in 2011 primarily due
to an increase in average commissions charged per trade as a result of an increase in retail
options trading as well as an increase in fees from margin debits due to
higher average margin debit balances. Additionally, there was an increase in our
institutional trading commissions and our commission recapture operations. |
| Investment
banking revenues for the three months ended March 31, 2012 were $509,000, a
decrease of $663,000 or 56.6% from the same period in 2011 primarily due to
our participation in fewer new issues in the equity and debt markets. |
| Trading
profits were $863,000 for the three months ended March 31, 2012, an increase
of $486,000 or 128.9% from the same period in 2011 primarily due to an
overall increase in customer trading volume in the debt markets. |
| Interest
and dividends for the three months ended March 31, 2012 were $23,000, an
increase of $14,000 or 155.6% from the same period in 2011 primarily due to
improved yields on money market balances. |
| Total
expenses for the three months ended March 31, 2012 were $5.8 million, a
decrease of $650,000 or 10.1% from the same period in 2011. |
| Employee
compensation and benefit costs for the three months ended March 31, 2012 were
$2.5 million, an increase of $27,000 or 1.1% from the same period in 2011 due
to an increase in commissions paid based on production in the capital markets
and retail operations offset by a decrease in compensation due to a reduction
in headcount for registered representatives. |
| Clearing
and floor brokerage costs for the three months ended March 31, 2012 were
$967,000, an increase of $43,000 or 4.7% from the same period in 2011 despite
an overall decrease in retail trading volume. The increase in costs reflected
a higher volume of retail options trading which costs more to clear as well as
an increase in execution charges for institutional equity and debt customers. |

11

| Professional
fees were $790,000 for the three months ended March 31, 2012, a decrease of
$623,000, or 44.1% from the same period in 2011 primarily due to a decrease
in legal fees relating to a dispute with a former employee. |
| --- |
| Advertising
and promotion expenses for the three months ended March 31, 2012 were
$138,000, an increase of $38,000 or 38.0% from the same period in 2011 due to
an increase in print advertising, brochures and direct mailing to our retail
customer base. |
| Communications
expense for the three months ended March 31, 2012 was $488,000, a decrease of
$69,000 or 12.4% from the same period in 2011 primarily due to a decrease in
Bloomberg devices due to fewer employees in the Institutional Trading
department and the result of the closing of our Surfside and Naples branches
in Florida during the fourth quarter of 2011. |
| Occupancy
costs for the three months ended March 31, 2012 were $251,000, a decrease of
$20,000 or 7.4% from the same period in 2011 due to the closing of our
branches in Surfside and Naples in Florida during the fourth quarter of 2011. |
| Other
general and administrative expenses were $639,000, a decrease of $46,000 or
6.7% from the same period in 2011 due to a decrease in depreciation, printing
and travel and entertainment offset by increases in registration and
placement fees. |
| Loss from
Siebert’s equity investment in Siebert, Brandford, Shank & Co., L.L.C.,
an entity in which Siebert holds a 49% equity interest (“SBS”), for the three
months ended March 31, 2012 was $146,000, compared to a loss of $1.1 million
from the same period in 2011. SBS serves as an underwriter for municipal bond
offerings. This loss was due to SBS participating in fewer managed and
co-managed transactions. Loss from our equity investment in SBS Financial
Products Company, LLC, an entity in which we hold a 33% equity interest (“SBSFPC”),
for the three months ended March 31, 2012 was $8,000 as compared to a loss of
$21,000 from the same period in 2011. These losses in 2012 and 2011 were due to
the mark to market loss in positions. Income and loss from equity investees
is considered to be integral to our operations and material to the results of
operations. |
| The income tax
provision for the three months ended March 31, 2012 and 2011 was $12,000 and
$11,000, respectively, representing various minimum state income taxes. There is no provision for other income taxes for the three
months ended March 31, 2012 because the Company utilized its net operating loss carry forward for which no benefit was previously recognized.
No tax benefit related to the pre-tax loss was recorded for the three months ended
March 31, 2011 due to the recording of a full valuation allowance to
offset deferred tax assets based on recent losses and the likelihood of
realization of such assets. |
| Liquidity and Capital Resources |
| Our
assets are highly liquid, consisting generally of cash, money market funds
and commercial paper. Our total assets at March 31, 2012 were $35 million. As
of that date, $22 million, or 64%, of our total assets were regarded by us as
highly liquid. |
| Siebert
is subject to the net capital requirements of the SEC, the NYSE and other
regulatory authorities. At March 31, 2012, Siebert’s regulatory net capital
was $18.5 million, $18.2 million in excess of its minimum capital requirement
of $250,000. |
| On
January 22, 2008, the Board of Directors of the Company authorized a buy back
of up to 300,000 shares of common stock. Shares will be purchased from time
to time, in our discretion, in the open market and in private transactions.
The Company purchased 3,850 shares at an average price of $1.65 in the first
quarter of 2012. |

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| |
| --- |
| Item 3. Quantitative and Qualitative
Disclosures About Market Risk |
| Working
capital is generally invested temporarily in dollar denominated money market
funds. These investments are not subject to material changes in value due to
interest rate movements. |
| Retail
customer transactions are cleared through clearing brokers on a fully
disclosed basis. If customers do not fulfill their contractual obligations,
the clearing broker may charge Siebert for any loss incurred in connection
with the purchase or sale of securities at prevailing market prices to
satisfy the customers’ obligations. Siebert regularly monitors the activity
in its customer accounts for compliance with its margin requirements. Siebert
is exposed to the risk of loss on unsettled customer transactions if
customers and other counterparties are unable to fulfill their contractual
obligations. There were no material losses for unsettled customer
transactions as of March 31, 2012. |
| Item 4. Controls and Procedures |
| We
carried out an evaluation, under the supervision and with the participation
of management, including our Chief Executive Officer and Chief Financial
Officer, of the effectiveness of the design and operation of our disclosure
controls and procedures as of the end of the period covered by this report
pursuant to Rule 13a-15(e) or Rule 15d-15(e) of the Securities Exchange Act
of 1934, as amended. Based on that evaluation, our management, including the
Chief Executive Officer and Chief Financial Officer, concluded that our disclosure
controls and procedures are effective to ensure that the information we are
required to disclose in reports that we file or submit under the Securities
Exchange Act of 1934, as amended, is recorded, processed, summarized and
reported within the time periods specified in the rules and forms of the
Securities and Exchange Commission and to ensure that information required to
be disclosed is accumulated and communicated to our management, including our
Chief Executive Officer and Chief Financial Officer, to allow timely
decisions regarding timely disclosure. |
| There
were no changes in our internal control over financial reporting that
occurred during our most recent fiscal quarter that have materially affected,
or are reasonably likely to materially affect, our internal control over
financial reporting. |

13

Part II - OTHER INFORMATION

Item 1. Legal Proceedings

| We are
involved in various routine lawsuits of a nature we deem to be customary and
incidental to our business. In the opinion of management, the ultimate
disposition of such actions will not have a material adverse effect on our
financial position or results of operations. |
| --- |
| Item 1A. Risk
Factors |
| In
addition to the other information set forth in this report, you should
carefully consider the risk factors discussed in Part I, Item 1A. “Risk
Factors” in our Annual Report on Form 10-K for the year ended December 31,
2011, which could materially affect our business, financial position and
results of operations. There are no material changes from the risk factors
set forth in Part I, Item 1A, “Risk Factors,” of our Annual Report on Form
10-K for the year ended December 31, 2011. |

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

| On January 23, 2008, our Board of Directors authorized the repurchase
of up to 300,000 shares of our common stock. Shares will be purchased from
time to time, in our discretion, in the open market and in private
transactions. |
| --- |
| We purchased 3,850 shares at an average price of $1.65 in the first
quarter of 2012. |
| A summary of our repurchase activity for the three months ended March
31, 2012 is as follows: |

Issuer Purchases Of Equity Securities

Period — January 2012	1,401	Average Price Paid Per Share — $ 1.52	110,165	189,835
February
2012	1,471	$ 1.64	111,636	188,364
March 2012	978	$ 1.83	112,614	187,386
Total	3,850	$ 1.65	112,614	187,386

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Item 6. Exhibits

| 31.1 | Certification
of Muriel F. Siebert pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a),
as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
| --- | --- |
| 31.2 | Certification
of Joseph M. Ramos, Jr. pursuant to Exchange Act Rule 13a-14(a) and
15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002. |
| 32.1 | Certification
of Muriel F. Siebert of Periodic Financial Report under Section 906 of the
Sarbanes-Oxley Act of 2002. |
| 32.2 | Certification
of Joseph M. Ramos, Jr. of Periodic Financial Report under Section 906 of the
Sarbanes-Oxley Act of 2002. |

15

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

| SIEBERT
FINANCIAL CORP. | |
| --- | --- |
| By: | /s/ Muriel F. Siebert |
| | Muriel F.
Siebert |
| | Chairwoman
and President |
| | (principal
executive officer) |
| Dated: May
15, 2012 | |

By:
Joseph M.
Ramos, Jr.
Executive
Vice President and Chief Financial Officer
(principal
financial and accounting officer)
Dated: May
15, 2012

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